Debt Ratios for Residential Lending

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Your debt to income ratio is a tool lenders use to calculate how much money is available for your monthly mortgage payment after all your other monthly debt obligations are fulfilled.

About your qualifying ratio

In general, conventional mortgage loans need a qualifying ratio of 28/36. FHA loans are a little less restrictive, requiring a 29/41 ratio.

The first number is the percentage of your gross monthly income that can go toward housing costs. This ratio is figured on your total payment, including homeowners' insurance, homeowners' dues, Private Mortgage Insurance - everything that constitutes the payment.

The second number is what percent of your gross income every month that can be spent on housing costs and recurring debt together. For purposes of this ratio, debt includes credit card payments, auto/boat payments, child support, et cetera.